Paulson, Bernanke brief lawmakers on bailout

Treasury Secretary Henry Paulson looks over his entourage after announcing that the Treasury Department will take equity stakes in potentially thousands of banks totaling about $250 billion at the Treasury Department Cash Room in Washington, October 14, 2008. Standing besides Paulson, (2nd L-R): Federal Reserve Chairman Ben Bernanke, President and CEO of the Federal Reserve Bank of New York Timothy F. Geithner, OCC Comptroller John Duggan and SEC Chairman Christopher Cox. REUTERS/Hyungwon Kang

WASHINGTON (Reuters) - Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke came to Capitol Hill on Monday to field questions from leading Democrats on how the $700 billion financial bailout bill is working.

“House Democratic leaders today made it clear to Secretary Paulson and Fed Chairman Bernanke that they must take immediate action and do everything they can to help hard-working Americans stay in their homes,” House of Representatives Speaker Nancy Pelosi said in a statement after the meeting.

The meeting, attended by Pelosi and other key House members, came as some Democrats were calling on the Bush administration to use money from the Wall Street bailout program to help ailing domestic auto manufacturers.

Pelosi said the Democratic leaders also urged Paulson to support Federal Deposit Insurance Corp. Chairman Sheila Bair’s $24 billion proposal to prevent about 1.5 million foreclosures.

Before the meeting, Pelosi deflected a reporter’s question on whether General Motors and other domestic automakers could survive long without help. She said the state of the auto industry would be discussed in more detail at another meeting.

The administration is supposed to engage in close consultations with Congress on how the $700 billion, approved last month, is being spent.

The program was originally intended mainly to mop up bad debt related to the home mortgage crisis, but Paulson last week redefined it to focus more on direct capital injections into banks and consumer-related debt.

The Treasury is working on allocating the first $350 billion in taxpayer funds.

Reporting by Richard Cowan and Donna Smith; editing by Mohammad Zargham